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Opinion

Inside Investment: Don’t write off DWS’s flying doctor

Acquired asset managers often fail to fulfil their promise, as Deutsche Bank has found more than once. But Deutsche’s parachuting of Axel Schwarzer into US firm DWS Scudder looks set to be a success story.

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Should you chance to overhear the CEO of a fund management company bemoaning his or her lot in life, feel free to dispatch a freshly drawn, icily cold bucket of water over that individual. McKinsey & Co’s 2005 asset management survey reveals that the average cost-income ratio in the industry is now 58%, in other words asset managers are operating with margins above 40% on average.

It’s no wonder then that investment banks and broker dealers, where even the very best managed businesses, such as UBS, have margins at the low 30% level, continue to find asset management franchises beguiling. The $18 billion merger of Merrill Lynch Investment Managers and BlackRock has seen the thundering herd increase its bet on fund management, even if some commentators think otherwise. It won’t be the last such deal.

Managing a fund management business after a big acquisition is one time when CEOs really earn their money. M&A in a business where people are the assets is notoriously difficult to get right. Just ask Deutsche Bank. If ever a bulge-bracket bank had a chequered history with acquired asset management businesses it is Deutsche.

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